Question: 1:) Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. The airline knows from

1:) Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. The airline knows from past history that an average of 35 customers (with a standard deviation of 24) cancel their reservation or do not show for the flight. Revenue from a ticket on the flight is $134. If the flight is overbooked, the airline has a policy of getting the customer on the next available flight and giving the person a free round-trip ticket on a future flight. The cost of this free round-trip ticket averages $263. Super Discount considers the cost of flying the plane from New York to Los Angeles a sunk cost.

A:)What is cost per unit of demand overestimated (C_o)?

b:)What is cost per unit of demand underestimated (C_u)?

C:)By how many seats should Super Discount overbook the flight?

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